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Tax Tips Newsletter
Serving you since 1993
May 2010 - Vol 5, Issue 4
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Greetings!
LH head shot Orange

I hope you are enjoying spring. The rain that we got earlier this year has really made all of the plants and flowers incredible this year. It's nice to be able to get out and enjoy them.

Many thanks to all of my clients for making this past tax season a huge success. I am so grateful to all of you for your trust in me and my staff.

If you have been waiting to hear from us regarding a return or another matter, please know that we have continued to have deadlines after April 15th. We have had deadlines on April 30, May 7 and May 15th. I appreciate your patience. We will be contacting you shortly to resolve your issue.

The office will be closed on Monday, May 31st for Memorial Day. I will be out of the office from May 23 - June 9 for a nice little trip.

Man buried with papers
Once you've filed your 2009 tax return, you may wonder which records you should keep and which ones you can run through the shredder. Here are a few suggestions.

If the IRS asks, you must be able to prove the validity of your tax return, which includes providing substantiation for each item reported on your tax return.

Here's a list of the most common records you need to keep:

* W2s, 1099s, and other records of income received.
* Receipts, cancelled checks, and other documentation for deductions taken.
* Written acknowledgments for charitable contributions.
* Records related to home improvements, sales, and refinances.
* Investment purchase and sales information, including brokerage statements.
* Records on IRAs and other retirement plans.

The IRS does not require that you keep your records in any particular way. The only requirement is that your records allow you and the IRS to determine your correct tax liability. So the key is to keep checks, receipts, and other records that document the income and deductions you've put on your tax return.

Wondering how long you need to keep these records? Keep tax records for as long as your return is subject to an IRS audit. Unless fraud, evasion, or a substantial understatement of income is involved, the IRS generally has only three years in which to question your return.

Because of various combinations of the statute of limitations and technical provisions in the law, keep records related to a specific tax return for seven years, rather than just for three years. If a record will affect future years, you may need to keep it even longer. And copies of tax returns should be kept permanently.

For any assistance you need or questions you have about record keeping, contact my office.
Business Team in Meeting
* COBRA SUBSIDY. The subsidy for COBRA health insurance premiums, which expired March 31, has been extended through May 31, 2010. The "Continuing Extension Act of 2010" was signed on April 15. It provides a continuation of the 65% subsidy for workers who lose their jobs between September 1, 2008, and May 31, 2010. The subsidy is available for up to 15 months.

* NEW 2010 TAX CREDIT. The recent health care reform legislation includes a new tax credit for certain small businesses that provide health insurance to their employees. The IRS is in the process of mailing postcards to more than four million small businesses and tax-exempt organizations to make then aware of this new credit for 2010.

The credit is generally available to small companies and tax-exempts that pay at least 50% of the cost of single coverage for their employees. For 2010, the maximum credit is 35% of premiums paid by businesses and 25% of premiums paid by tax-exempt organizations.

The maximum credit goes to those employers with ten or fewer full-time equivalent employees who pay annual average wages of less than $25,000. The credit gradually phases out for firms with average wages between $25,000 and $50,000 and between 10 and 25 employees.

* HIRE ACT CERTIFICATION. The HIRE Act, passed in March 2010, provides tax incentives for companies to hire unemployed workers. One of those incentives is an exemption from social security payroll taxes for qualified workers hired after February 3, 2010, and before January 1, 2011.

The IRS has released Form W-11 which is to be filled out by the new hire, certifying under penalty of perjury that he or she was either unemployed or worked fewer than a total of 40 hours during the 60 days prior to taking the current job.

The W-11 forms are not filed with the IRS; they are to be kept by the employer along with other payroll records.

For details on any of these items that could affect your business, give me a call.
Flag & Eagle
The Tax Tip of the Weeek. Check out what's best for you with the "act now, pay later" option on converting your traditional IRA's to a ROTH IRA.

The Business Tip of the Month gives the business owner info on how to get a better handle on the health of their business.

The Financial Tip of the Month discusses the conflicting ideas of who should pay for your child's college education.

The Fraud Alert gives some cautionary advice to those who purchase on internet bidding sites.

Photos © Bigstockphotos.com, istockphoto.com, Felix Orona

Sincerely,
Linda Heineman
Linda L. Heineman, CPA, CITP

phone: 626-577-0979
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